In about five years, the U.S. federal government could starting spending more in interest on its debt than on the military — which accounts for more than half of discretionary spending — or domestic programs like Medicaid, The New York Times reports, citing Congressional Budget Office projections. "The run-up in borrowing costs is a one-two punch brought on by the need to finance a fast-growing budget deficit, worsened by tax cuts and steadily rising interest rates that will make the debt more expensive," the Times explains.
Years of record low interest rates have "allowed the government to take on more debt without paying more interest," says Marc Goldwein at the Committee for a Responsible Federal Budget. "That party is ending," and "by 2020, we will spend more on interest than we do on kids, including education, food stamps, and aid to families." Within 10 years, the U.S. will face more than $900 billion a year in interest payments, the CBO projects. Next year, when the federal deficit is forecast to top $1 trillion, interest costs will hit $390 billion, 50 percent more than in 2017.
Interest payments were already going to grow without the massive tax cut Republicans pushed through in December and higher spending approved by both parties in February. But the combination of the tax cuts, spending hikes, and rising interest rates puts the U.S. in the largely uncharted territory of stimulating an already booming economy, giving the government fewer tools for when a recession hits. "There's no guarantee that these forecasts will prove accurate," the Times cautions. "If the economy weakens, rates might fall or rise only slightly, reducing interest payments. But rates could also overshoot the budget office forecast." You can read more, and see some helpful charts, at The New York Times. Peter Weber